Assessing welfare impacts of some debt-consolidation episodes in the European Union
AbstractThis paper aims at characterizing debt consolidation processes put forward by some European countries in order to assess welfare and, in particular, the inequality effects involved. For that we built a general equilibrium heterogeneous-agent model capable of exploring the relationship between fiscal policy variables and the endogenous crosssection distribution of income and wealth. Results show that, with the exception of the Belgian case, all consolidation strategies entail positive welfare gains. The transition costs affect all episodes and are determinant in sorting among the welfareenhancing strategies. Our results confirm the superiority of the adjustments based on unproductive expenditures over those based on tax increases or social transfer reductions. Finally, all strategies involve lower welfare inequality costs.
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Bibliographic InfoPaper provided by Universidade do Porto, Faculdade de Economia do Porto in its series CEF.UP Working Papers with number 1106.
Length: 34 pages
Date of creation: Oct 2011
Date of revision:
fiscal consolidation dynamics; European Union; heterogeneous agent model; inequality; welfare.;
Find related papers by JEL classification:
- E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
- I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-11-01 (All new papers)
- NEP-MAC-2011-11-01 (Macroeconomics)
- NEP-PUB-2011-11-01 (Public Finance)
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